{"id":97855,"date":"2019-08-22T15:40:09","date_gmt":"2019-08-22T15:40:09","guid":{"rendered":"https:\/\/stockchase.com\/discover\/?p=97855"},"modified":"2019-08-22T15:40:09","modified_gmt":"2019-08-22T15:40:09","slug":"king-of-canadian-restaurant-stocks","status":"publish","type":"post","link":"https:\/\/stockchase.com\/discover\/king-of-canadian-restaurant-stocks\/","title":{"rendered":"The King of Canadian Restaurant Stocks and 6 More"},"content":{"rendered":"

Hungry for restaurant stocks? With markets late in the cycle, are restaurant stocks still worth sampling? Any upside? Here’s the menu:<\/p>\n

Restaurant Brands International (QSR-T)<\/b><\/a><\/u><\/span><\/span><\/p>\n

\"rbi\"<\/p>\n

Restaurant Brands International (QSR-T) remains the king of Canadian resto stocks, holding Timmy’s, Popeye’s and Burger King under its large umbrella. Greg Newman<\/a> considers QSR recession-proof, because people will always buy fast food. QSR has an ambitious plan to expand from 26,000 stores to 40,000 in the coming decade<\/a><\/u><\/span><\/span>. It has a healthy free cash flow and fine upper management. QSR has also been buying back shares<\/a><\/u><\/span><\/span>. Organic growth of 10-12% is driven by same-store sale increases at Popeye’s and Burger King, while Tim Horton’s is accelerating after a tough 2018.<\/p>\n

Stan Wong<\/a> is also bullish on QSR, considering it a defensive hold with its lower beta. He expects further earnings growth and is happy to be collect the 2.71% dividend yield, even though the stock trades at a near-31x PE.<\/p>\n

Brett Girard<\/a> likes how flagship holding, Tim Horton’s has expanded their menu, from breakfast to lunch and now expanding to dinner.<\/p>\n

Hap Sneddon<\/a>‘s technical analysis tells him that QSR has been rangebound the last few years, though the chart has been generally upwards since 2016. So far in 2019, QSR has been on a tear, up nearly 40%, performing twice as well as the TSX and McDonald’s (more on them later). In fact, QSR at $96 currently meets its price target, so Newman<\/a> suggests buying on a pullback.<\/p>\n

Before you buy, consider a dissenting voice in Paul Gardner<\/a>, who doesn\u2019t endorse management\u2019s strategy of cutting costs to the core, particularly its recent treatment of Tim Hortons franchise owners<\/a><\/u><\/span><\/span> in Canada, which sparked a class-action lawsuit<\/a><\/u><\/span><\/span>. Not only that, but American franchisees<\/a><\/u><\/span><\/span> have launched their own suit in a territory where QSR wants to break into. U.S. sales<\/a><\/u><\/span><\/span> were down 5.1% in 2018. Can long-term expansion work?<\/p>\n

Given this, Gardner<\/a> suggests that QSR spin-out the Tim Hortons name out. He wouldn’t buy it because of this U.S. conflict and the high multiple.<\/p>\n

McDonalds (MCD-N)<\/b><\/a><\/u><\/span><\/span><\/p>\n

\"mc<\/p>\n

Love ’em or hate ’em, Mickey D’s remains the global giant in fast food. While every Canadian knows Tim Horton’s, the entire world recognizes the golden arches. Ian Fung<\/a> prefers MCD to QSR for its lower debt. Gordon Reid<\/a> calls them a cash machine. With more than 90% of its stores franchised, McDonald’s owns the properties and leases them back to the franchisee.<\/p>\n

Though they’ve been around since the 1940’s, McDonald’s has kept up with trends and bounced back after periods of falling of fashion. It’s a core holding for Hap Sneddon<\/a> who likes how the chain started changing their model in 2016 by offering new products like the all-day breakfast. Since then, the chart shows higher highs and higher lows.<\/p>\n

Lorne Steinberg<\/a> expects the 2.19% dividend to increase given MCD’s large cash flow, but with a PE of nearly 28 warns that it isn’t cheap.<\/p>\n

But not everything is golden under the arches. U.S. same-store sales rose 2.3% in the fourth quarter that ended Dec. 31, 2018<\/a><\/u><\/span><\/span>, continuing MCD’s steady performance in recent years, but the chain’s total guest counts declined 2.2% in 2018. That was was the fifth time in the previous six years that fewer customers ate at McDonald’s. In fact, Mickey D shaved 122 locations in 2018. For the first time since 2009, there were fewer than 14,000 McDonald’s in the States, down 3% since from its peak of 14,350 in 2014.<\/p>\n

Freshii Inc (FRII-T)<\/a><\/u><\/span><\/span><\/strong><\/p>\n

\"freshii\"<\/p>\n

As more people eat healthier, as witnessed by the current craze for anything Beyond Meat<\/a><\/u><\/span><\/span>, you’d expect healthy chains like Freshii to cash in. Wrong. Though analysts like Peter Hodson<\/a> like the restaurant, they won’t buy the stock. Teal Linde<\/a> reflects the street consensus by saying Freshii has struggled since its promising IPO in January 2017<\/a><\/u><\/span><\/span>. In fact, its chart since then is a long downward slope from over $14 to $2.58.<\/p>\n

What happened? Analysts like Peter Imhof<\/a> doesn’t believe management has a handle on operations. Bruce Murray<\/a> finds the food itself too expensive. Brian Madden<\/a> feels that IPO valuation was ludicrously high and management had unrealistic growth expecations. Freshhi pays no dividend and its EPS is negative.<\/p>\n

Domino’s Pizza, Inc. (DPZ-N)<\/a><\/u><\/span><\/span><\/strong><\/p>\n

\"dominos<\/p>\n

Remember this video<\/a><\/u><\/span><\/span>? Who doesn’t love pizza? In particular, the street loves Domino’s, America’s biggest pizza chain<\/a><\/u><\/span><\/span>. Barry Schwartz<\/a> predicts it’ll continue to dominate the market as it adds 10,000 more stores in six years<\/a><\/u><\/span><\/span>, or a whopping 60%. A vast majority will open outside the States. Management employs a \u201cfortressing\u201d strategy to open a lot of stores in a place to force out competition, such as in India.<\/p>\n

Domino’s also employs technology. Wolfgang Klein<\/a> thinks their pizza is terrible, but lauds Domino’s as a tech stock, not food. The company leads the space in food apps and logistics<\/a><\/u><\/span><\/span> which generate two-thirds of their business.<\/p>\n

The street feels that Domino’s will continue to deliver not only pizzas but growth. Its chart since the Great Recession began in fall 2008 looks like a mountain, with the share price leaping from $4.71 on Dec.1, 2008 to an astonishing $245 today. That said, Domino’s has had a volatile 2019, dropping from $295 in February to $240 just a month later.<\/p>\n

More disturbing, Domino’s Q2 growth of 3%<\/a><\/u><\/span><\/span> fell short of street expectations and was the slowest in three years. The dividend pays less than its peers at 1.06% at a 27.43 PE.<\/p>\n

Boston Pizza Royalties (BPF.UN-T)<\/a><\/u><\/span><\/span><\/strong><\/p>\n

\"bp<\/p>\n

The reviews are not good: The concern is the 8.2% yield at 85% payout, says Robert McWhirter<\/a>. The trend says lower lows and lower highs, adds technical analyst Jon Vialoux<\/a> in looking at BPF’s chart. James Hodgins<\/a>, though, feels the dividend is safe, but in general expects mid-sized Canadian consumer companies in general are at risk, if the real estate market rolls over. Peter Hodson<\/a> also has mixed feelings, saying that BPF is okay to hold for that juicy dividend, but it won’t fill you with growth.<\/p>\n

A&W Revenue Royalties Income Fund (AW.UN-T)<\/a><\/u><\/span><\/span><\/strong><\/p>\n

\"AW\"<\/p>\n

Instead, Hodson prefers A&W. The burger company has seized the healthy eating trend by introducing meatless burgers (and fish), and the street has responded. In the last six months, A&W has leapt from $38 to $46. More telling is that AW has endured the current volatility by stubbornly remaining in the $43 range, given or take a dollar.<\/p>\n

It pays a generous 4.43% dividend yield, growing 5% annually based on good free cash flow. As a result, REIT investors love it, comments Brian Madden<\/a>. A&W’s compound annual rate of return at 16.5% over 17 years. As a royalty trust operating 900 Canadian restaurants, A&W earns a 3% royalty from every dollar of sales from its franchisees. However, A&W doesn’t put up a fime to build those locations; the franchisee does. A&W is capital-lite and growth. Same-store sales growth was 10% last year.<\/p>\n

Javed Mirza<\/a> likes its the chart of higher highs and higher lows. Expect a sideways consolidation, he advises, after the recent sharp move. Hold and collect the dividend while it consolidates.<\/p>\n

outlier: Jollibee Foods Corp.<\/a><\/strong>We don’t have much coverage on this giant Filipino fast food chain that is expanding to Canada<\/a> with a lot of hype, but it’s definitely one to watch. It trades from the Filipino exchange at a PE of 37.22 and pays a 1.04% dividend. But the story here is its world expansion. Can it conquer lands beyond its shores? Stay tuned?<\/p>\n

Next<\/em> week<\/em>: food stocks. Bon appetit!<\/p>\n","protected":false},"excerpt":{"rendered":"

Hungry for restaurant stocks? With markets late in the cycle, are restaurant stocks still worth sampling? Any upside? Here’s the menu: Restaurant Brands International (QSR-T) Restaurant Brands International (QSR-T) remains the king of Canadian resto stocks, holding Timmy’s, Popeye’s and […]<\/p>\n","protected":false},"author":12,"featured_media":98819,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"cwp_meta_box_check":"No","cwp_rev_product_name":"","cwp_rev_product_image":"","wppr_links":[],"cwp_rev_price":"","wppr_options":[],"wppr_pros":[],"wppr_cons":[],"footnotes":""},"categories":[9],"tags":[170,179,70,180,181,135,182],"class_list":["post-97855","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-top","tag-dividends","tag-fast-food","tag-investing","tag-mcdonalds","tag-pizza","tag-recession","tag-restaurant"],"wppr_data":{"cwp_meta_box_check":"No"},"_links":{"self":[{"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/posts\/97855","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/users\/12"}],"replies":[{"embeddable":true,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/comments?post=97855"}],"version-history":[{"count":0,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/posts\/97855\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/media\/98819"}],"wp:attachment":[{"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/media?parent=97855"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/categories?post=97855"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockchase.com\/discover\/wp-json\/wp\/v2\/tags?post=97855"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}